Late last week, ASIC said it has found that, in recent fundraisings, some accountants have used trust or company structures that purport to allow investors who are not 'sophisticated investors' to receive offers to purchase shares without a prospectus or other disclosure document.

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Under the Corporations Act, accountants are able to provide a certificate of attesting that a person is a 'sophisticated investor' and therefore does not need the protections that apply to a 'retail investor'.

The Fold Legal director Jaime Lumsden Kelly said a poor understanding of the wholesale investor test by financial services professionals may have contributed to ASIC’s investigation activities in this area.

Still, ASIC’s statement raises questions about their intentions with the announcement last week.

For example, ASIC has suggested that accountants are using the certificate to circumvent the need for a prospectus for retail investors.

“[However], the accountant is only asked to supply a certificate stating that a client has certain net assets and income. This is an objective fact — either the client does or does not. It is the licensee that then uses that certificate to assess a client as wholesale,” explained Ms Lumsden Kelly.

It is therefore unclear at this stage, she said, whether ASIC is suggesting that accountants are falsifying certificates, or if the accountant providing the certificate is also the licensee in question.

“[The latter] in our view, is a conflict of interest, because the licensee, who is also the accountant who is giving the certificate, is motivated to assess the client as wholesale.

Ms Lumsden Kelly also noted that ASIC has mentioned in the announcement that accountants have used trust or company structures to avoid the need for a prospectus.

“We note that they used the word ‘purported’ which we assume means these structures are not actually lawful,” she said.

“This makes sense to us, because you are only able to avoid using a prospectus with a company or trust if the company or trust is controlled by someone who meets the net assets/income test. If they did meet that test, then there would be no need to try and use some form of additional structure to avoid the prospectus requirement.”